Date: Mon, 19 Dec 2005 16:58:11

From: Andrew Tettenborn

Subject: Snapping at an Offer

I suspect there may be a widening gulf here between England and Canada. On the eastern side of the pond, Smith v Hughes has been interpreted as meaning you *can* hold the other side to a contract even though he's seriously mistaken and you know it. The most recent example was the slightly grisly Sykes v Taylor-Rose [2004] EWCA Civ 299, [2004] N.P.C. 34. Sale of a house: as the vendor knew but the purchaser didn't, a previous owner a year or so earlier had murdered & chopped up a victim into small bits which he then distributed artfully round the premises. And at the time of the same they hadn't as yet found them all ... the contract stood.

The one exception is where an offeror makes a slip in the * terms * he intends then and there to offer. But nothing short of that will do. The case where a tenderer, to the knowledge of the tenderee, bids low because he's forgotten to factor in a given cost in preparing his tender would (I think, subject to correction) go in favour of the tenderee in England.

Andrew

>===== Original Message From John Swan =====

Smith v. Hughes does not support an argument that the contract for the purchase and sale of the shares is valid and enforceable. The common law would not let a buyer get away with purchasing shares for a tiny proportion of their value on the basis that the buyer could have had no reasonable expectation that the seller meant to sell at the price it offered.

McMaster University v. Wilchar Construction Ltd. [1971] 3 O.R. 801, 22 D.L.R. (3d) 9; aff'd, (1973), 12 O.R. (2d) 512n, 69 D.L.R. (3d) 400n, and Stepps Investments Ltd. v. Security Capital Corporation (1976), 14 O.R. (2d) 259, 73 D.L.R. (3d) 351, are Canadian examples where one party was not allowed to hold the other to a deal in circumstances where the first party knew that the other had made a mistake. Smith v. Hughes would support this result to the extent that it stands for the argument that one party cannot hold the other to a deal when the first party knows that the other is labouring under a mistake.

Andrew Tettenborn
Bracton Professor of Law, University of Exeter, England

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- Ambrose Bierce (1906).

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